Soft Metrics

Sometimes it’s easy to tell whether or not a startup company is going to survive. For example, we knew from the get-go that Cluckwear, an apparel company dedicated to making clothing out of chicken parts, wasn’t going to last very long. But let’s say we’re looking at a startup that doesn’t have a blatantly terrible business concept. How do we evaluate them? How do we know whether they’re going to be successful or not? It’s not like we can scour their financial statements or analyze their stock performance.

What we can do is look at their “soft metrics": the intangible stuff that can clue us in as to a startup’s potential for success. Soft metrics aren’t quantifiable like stock prices and financial statements are, but they can still give us a pretty good idea about how the company operates. Soft metrics can include stuff like leadership personalities: if we’ve got a CEO with a horrible temper, disastrous personal finances, and a penchant for illicit drugs and prostitutes, that might give us pause about her ability to lead a company. Or we might look at the buzz around the company: anyone with a brain could’ve told those geniuses over at Cluckwear that their products weren’t going to take off—pun intended—just based on the reaction and comments of would-be consumers on social media. No one wants chaps made of chicken skin, and no amount of hype or celebrity endorsement is going to change that.

These are two semi-obvious examples, but soft metrics can include a lot of less obvious stuff, too. Are important investors interested in getting involved with the company? Has their online traffic increased? Will the fact that their main would-be competitor is experiencing financial difficulties impact their profitability? Does the public already know and love the brand, the CEO, or some other aspect of the business? Will general economic conditions help or hurt this company’s prospects? These are all things that we might not be able to put real numbers to, but they can still help give us a feel for how our little startup might fare once it, like, starts up. And when it comes to brand-new companies, getting a feel can be better than getting nothing at all.